Stock Options Basics, Part 4 Special Situations

In this series I’m covering the absolute basics of options. Note that I am not recommending the use of options is any way. I am simply trying to make you aware of how options work to increase your knowledge it the area of investing.

Now that we’ve made it through the basics I’d like to stretch your creative minds a bit and throw out a few special circumstance ideas beyond simply speculating by buying calls and/or puts:

• rather than simply selling stock you want to get rid of, you could consider selling a deep in the money call. You’ll get the premium, and if all goes as planned the stock will either go up or won’t drop much and you’ll end up selling the stock when the option expires.
• If you’re worried about your stock dropping but don’t want to sell, you could consider buying some puts that will insulate you (mostly) from a severe decline. Your puts would go up in value, your stocks would go down in value.
• options provide leverage, which as always can be both good or bad. For a minimal investment however, purchasing calls or puts can provide a way to speculate (if that’s your thing) without having to put a large chunk of your available capital

If You Liked This Post Then Please Check These Out...

• Stock Options Basics, Part 3 Selling Options
• Stock Options Basics, Part 2
• Stock Options Basics, Part 1
• For The Love Of Dividends
• I Don’t View Commodities As Investments

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